The currency blog

With the London markets closed yesterday sterling emerged into trading this morning relatively unscathed. It was probably slightly supported on the better than expected GDP data on Friday coming in at -0.7% against the forecast of -0.8%. This morning first thing we were actually advancing against the USD and the EURO; however UK data at 9:30 soon put pay to that. UK manufacturing PMI data fell when the market was looking for a rise- this quickly led to sterling shedding its gains against the USD and EUR and moving down towards 1.62 and 1.13 respectively. In other UK data mortgage approvals were up slightly but not significant to benefit the pound.

In other data released the Eurozone came out smelling of roses with European manufacturing PMI up, German unemployment better than expected and Italian business confidence also improving. The Eurozone unemployment rate came in at 9.5% which is weak but was expected. This week the market will focus on the ECB meeting to shed more light on the ECB’s plans going forward.

In other news the reserve bank of Australia left interest rates unchanged as widely expected- although some market participants were calling for a rise in rates. It is expected that a rate rise could come by the end of the year and this sentiment will support further AUD strength. Tonights GDP will be a key data release for the Australian economy- another area to watch is the performance of China; overnight on Friday the Shanghai index fell sharply and concerns are growing that the recent growth in China is not sustainable- if this sentiment grows then we could see large repercussions in the markets.

Finally the Yen gained across the board as investors cheered the new leadership of the Democratic Party of Japan. This week aside from the ECB decision we have major releases from the US on Friday in the form of non-farm payrolls, unemployment and hourly earnings.

Discuss on this on the Currency Exchange Forum